1. The assessee is aggrieved of the order dated 1-8-1981 of the learned Commissioner (Appeals), Lucknow.
2 to 6. (These paras are not reproduced here as they involve minor issues.] 7. The next ground relates to the disallowance of the assessee's claim of weighted deduction under Section 35B(1A) of the Income-tax Act, 1961 ('the Act'), amounting to Rs. 1,30,349. The assessee claimed to be a small-scale exporter within the meaning of Section 35B(1A) inserted by the Finance Act, 1978, with effect from 1-4-1978. The case of the assessee was that it was a small-scale exporter who maintained a show room for export articles and also made purchases of goods from various karkhanadars who in fact carried on the business as a cottage industry which is a small-scale industry owned by it. However, the ITO did not accept the submission. In appeal, the learned Commissioner (Appeals) upheld the order of the ITO. In doing so, he was influenced by the fact that the assessee did not have manufacturing licence or power connection or machinery. He noticed that in the balance sheet, fixed assets had been shown at Rs. 53,995 only. He took the view that the assessee was getting unfinished goods from artisans and was only having them polished, engraved and finished by others on payment of wages. He was also of the view that the assessee was not carrying on any manufacturing activity and that its main business was to get the exportable items ready through the agency of others and then to export them.
8. In appeal before us, Shri Kuldeep Arora, the learned Counsel for the assessee reiterated the submissions made on behalf of the assessee before the Income-tax authorities. He submitted that the assessee was the owner of small-scale undertaking at which manufacturing was done.
He submitted that the trading account showed expenditure on goods purchased, polishing, plating, engraving and packing. He also referred to the schedule of fixed assets wherein machinery was mentioned.
Reliance was also placed by him on the decision dated 7-11-1982 of the Tribunal in the case of Talwar & Khuller (P.) Ltd. [IT Appeal Nos. 2400 and 2401 (Delhi) of 1981] for the assessment years 1978-79 and 1979-80 and to another order dated 7-5-1983 by which the reference applications filed on behalf of the department under Section 256(1) of the Act had been rejected by the Tribunal in Reference Appeal Nos. 93 and 94 (Delhi) of 1983. Reliance was also placed by him on the decision of the Hon'ble Allahabad High Court in CWT. v. Radhey Mohan Narain  135 ITR 372 and the decision dated 6-8-1982 of the Tribunal, Allahabad pench, in H.M. Sons v. ITO  4 ITD 25 wherein the said decision of the Hon'ble Allahabad High Court had been relied upon. On the other hand, Shri M.K. Chakraborty, the learned departmental representative placed reliance on the orders of the Income-tax authorities as also on the decisions of the Supreme Court in CWT v. Bishwanath Chatterjee  103 ITR 536 and Smt. Tarulata Shyam v. CIT  108 ITR 345.
9. We have considered the rival submissions as also the decisions, referred to above. Section 35B(1A) as inserted by the Finance Act, 1978, with effect from 1-4-1978, provides that the assessee should be engaged in the business of export of goods and should be either a small-scale exporter or the holder of an export house certificate. The assessee has claimed that it is a small-scale exporter. This expression has been defined in Explanation (a) as a person who exports goods manufactured or produced in any small-scale industrial undertaking or undertakings owned by him. 'Small-scale industrial undertaking' has been further defined of having same meaning as assigned in Clause (ii) of the Explanation below Section 32A(2). The assessee purchases raw material in moulded forms described as 'koramal', i.e., prepared material in a raw and unfinished condition, but not the final product.
'Koramal' referred to above is soldered in the assessee's factory, engraved and polished. This process was explained by the assessee before us. The expenses for packing, polishing, plating and engraving have been included in the assessee's trading and profit and loss account. The details of the total wages paid also bear out the fact that the assessee maintained an establishment where soldering, polishing and plating, engraving and packing were done with the help of workmen or labourers and to whom wages were paid. In the schedule of fixed assets, furniture and fixtures are mentioned of which the written down value is mentioned. There is no electroplating involved on brass items which only require buffing. From the above facts, it is clear that the assessee qualified as a small-scale exporter within the meaning of the term as used in the Explanation to Section 35B(1A). The decision of the Tribunal in the case of Talwar & Khuller (P.) Ltd. (supra), with reference to similar activity was also the same. In fact, in the case of Wazid Sons (P.) Ltd. Moradabad, the learned Commissioner (Appeals), Bareilly accepted the assessee's submission for the assessment year 1979-80, a copy of the order being on the file. In the case of Bishwanath Chatterjee (supra), the Supreme Court was explaining the meaning of the term 'belonging to the assessee' and in the case of Smt. Tarulata Shyam (supra), the Supreme Court was only clarifying the principle of interpretation that there is no scope for importing into the statute words which are not there and that if there, been a casus omissus, the defect can be remedied only by legislation. These decisions cannot be availed of by the department on the facts of the present case. In the case of H.M. Sons (supra), following the decision of the Hon'ble Allahabad High Court in the case of Radhey Mohan Narain (supra), the Tribunal had held that the activity of preparing bed sheets from plain cloth amounted to processing of goods and that the assessee satisfied the requirements of Explanation (a) to Section 35B(1A). Looking to the above discussion, we are of the view that on the facts of the present case, the assessee was entitled to be treated as a small-scale exporter and to be entitled to weighted deduction under Section 35B in accordance with law. The ITO is, accordingly, directed to consider the assessee's claim on that basis.